Tort reform associated with increase in physician supply

May 25 2005

States that enacted malpractice reforms had an increase in their overall supply of physicians, according to a study in the June 1 issue of JAMA.

Debates about medical malpractice have recurring themes, with tort reformers emphasizing the threat that liability crises pose to the cost and availability of medical services and tort defenders emphasizing the importance of liability to medical quality, according to background information in the article. Effects on access to health care are of particular concern during "malpractice crises," when rising liability insurance premiums and uncertain coverage are said to induce physicians to avoid high-risk patients or procedures, relocate to other communities, or leave practice altogether. Even between such crises, however, malpractice climate remains one of many factors determining how many physicians enter the medical profession, what specialties they choose, and where they practice.

Daniel P. Kessler, Ph.D., J.D., of the Stanford University Graduate School of Business, Hoover Institution, and the National Bureau of Economic Research, Stanford, Calif., and colleagues investigated whether and how liability pressure affects long-term trends in physician supply from state to state. The researchers used data from the American Medical Association's Physician Masterfile on the number of physicians in active practice in each state for each year from 1985 through 2001, and matched this with data on state tort laws and state demographic, political, population, and health care market characteristics.

The researchers found that the adoption of "direct" malpractice reforms that reduce the size of awards (such as caps on damages) led to greater growth in the overall supply of physicians. Three years after adoption, direct reforms increased physician supply by 3.3 percent, controlling for fixed differences across states, population, states' health care market and political characteristics, and other differences in malpractice law. Direct reforms had a larger effect on the supply of nongroup vs. group physicians, on the supply of most (but not all) specialties with high malpractice insurance premiums, on states with high levels of managed care, and on supply through retirements and entries than through the propensity of physicians to move between states. Direct reforms had similar effects on less experienced and more experienced physicians.